China’s headline real GDP growth slowed to 4.0% y/y in Q4, weighed down by the flagging property sector. Today, the PBOC intensified its response to the slowing economy with the first interest rate cut since April 2020. While most indicators pointed to COVID-related lockdowns and travel restrictions limiting household consumption and income growth, official expenditure-side data surprisingly showed consumption driving economic growth in Q4.
Surprises in 2021 full-year data included producer price inflation on the high side, led by global crude prices, and on the low side, a full-year 5.4% decline in crude oil imports. Continued monetary easing and stronger private sector credit demand will be critical to kickstart a recovery in 2022, along with improvements in property sales. Birth rates continued declining in 2021, suggesting China’s overall population will peak this year or next.
